Flexible employee benefits can be an effective prescription for employers to retain and attract the talent needed today.

I was waiting for a cab outside the building, checking my emails and thinking about how digitisation has revolutionised the way we work. Back in the day, it was common for us to reschedule meetings because our colleagues or clients were stuck in traffic or had their flights cancelled. Now, with pervasive connectivity, we can work anywhere, and this enables us to bring significant value to the organisation’s performance. And it’s not only employers who win. This ability to work remotely provides many personal benefits for employees too. It allows them to better manage non-related work commitments such as child care, exercise and other well-being activities. This gives employees much better work-life balance and a happy workforce is more likely to be retained.

FLEXIBILITY AND FREEDOM TO CHOOSE IS KEY

The digital world has cultivated a new breed of talents who prioritise independence and flexibility in their work. Organisations looking at improving their ability to attract and retain talents may want to consider introducing flexible benefits as a talent management solution. Flexible benefits schemes have been widely used in many matured markets and are rapidly replicated by many organisations globally.

The underlying idea of a flexible benefits scheme is that individuals from different generations, marital statuses, education backgrounds have dissimilar needs and interests. As such, a flexible benefits scheme would allow employees to choose the desired reward components based on their specific needs.

Based on our experience in assisting clients design their remuneration and benefits strategy, it was found that reimbursement is very popular among single employees under the age of 30. Such reimbursements can come in the form of fitness membership expenses, travel expenses and course expenses – typically to meet their short-term cashflow needs. As for middle-aged employees with families, their preference would be to have a sound medical plan and they tend to upgrade the benefits to cover their children or their spouses. For employees above the age of 45, they are usually more interested in having tax-effective benefit plans or having an option to top up their pension contribution and medical plans.

However, it is vital to recognise there is no one-size-fits all approach – what works in one organisation may not enjoy the same success in another organisation. Therefore, HR professionals should analyse the demographics of the employees to ascertain their needs, before formulating the most suitable scheme that works best for all.

Kick-start the engine

Any discussion on benefits programmes, including flexible benefits, should always begin with reviewing the organisation’s strategy and objectives. Generally, organisations should look to achieve two objectives:

  1. Support organisation’s branding and value proposition to attract talent in the market and retain internal high potential talent; and
  2. Increase the ability to manage cost related to benefits and avoid unnecessary spending for underutilised benefits.

To accomplish that, below are some tips to ensure a successful flexible benefits implementation:

Analysis of data and timing

Before designing the benefits scheme, invest time to analyse available historical data to understand current benefit utilisation. Involve your employees in focus groups or employee surveys to better understand their needs. It is important that HR is not the sole decisionmaker in ascertaining which benefits are right for employees. HR should get inputs from the employees and Heads of Division, who would have a better understanding of their employees’ needs. In addition, it is critical to select the right time to launch the programmes to ensure better participation and smoother administration – whether it is parallel with the fiscal year, pay review year or calendar year.

On-going communication

Thorough communication is key. The employees’ level of acceptance and appreciation towards the flexible benefits program is dependent on the effectiveness of communication plans. Organisations should promote the scheme through corporate emails, posters, seminars, promotional videos, and other relevant resources. That way, the management team can continue to maintain employees’ enthusiasm and deepen employees’ understanding on how the scheme can bring value to their needs. On-going review must be made available to ensure that employees will always have a place to ask questions and raise suggestions to improve the program. Routine monitoring process on employees’ participation rate can also be used to measure the success of the program.

Ensure simplicity

The implementation of a flexible benefits scheme can be a big change for both employer and employees. Simplicity is the key. Hence, it is important not to complicate the scheme and introduce all sophisticated features within a year of implementation. Give employees ample time to ease into the new scheme, understand the objectives and learn what they need to do to reap the benefits of the scheme. By rolling out too many benefits straightaway, organisations will create confusion and resistance, and struggle to keep it renewed going forward. Ease of access is also important – platforms used to support the flexible benefits scheme need to be user-friendly and compatible with smartphones and tablets to allow easy access and participation anytime anywhere.

Learn from other companies’ experiences

The flexible benefits scheme in Pfizer Indonesia is not a recent phenomenon. Having run the flexible benefits scheme for 20 years, its scheme is about keeping compensation scheme relevant to the employees’ well-being, including allowing employees to opt out of benefits altogether, if they want to, within allocated cost. Today, 100% of Pfizer’s employees are onboard the flexible benefits scheme. The employees’ fondness toward the program is the result of a smooth communication between the employees, program owner and the third parties supporting the program.

“The implementation of the flexible benefits scheme allows Pfizer to manage the overall efficiency of the benefits as well as increase our ability to attract potential talent and retain our existing talent at the same time,” said Feifei Enhudjiana, HR Director of Pfizer Indonesia. “Pfizer is committed to always enhance the value of the program through on-going customisation of benefits packages, following the changes in employees’ demography”, she added

Besides Pfizer Indonesia, one of the biggest telecommunication companies in Indonesia, Indosat Ooredoo, introduced the flexible benefits scheme in 2015. There are three main reasons that drove the decision to implement the scheme:

  1. High medical cost: Continuous increase in medical cost due to fully-covered and self-insured medical benefits for all employees.
  2. Demography shift: Diminishing domination of Gen X and Baby Boomer, to growing Gen Y and Millennials.
  3. Talent market competitiveness: The need for proactive action in retaining and attracting potential talents.

Based on an employee engagement survey, the positive reviews unveiled that the flexible benefits scheme is well-received by the employees. Encouraged by the positive response, Indosat Ooredoo has also enhanced the scheme through providing alternatives to the existing benefits as well as the vendors who provide the services.

“After two years of implementation, the flexible benefit scheme has shown its value and is successful in attracting prospective talents to join Indosat Ooredoo. Though the programme has brought down the overall cost of the benefits, our employees remain satisfied towards the benefits they enjoy.” Rocky Christian, Manager of Remuneration Planning.

Yet, the implementation of flexible benefit schemes in both Pfizer and Indosat Ooredoo is not without hurdles. The main challenge faced by both organisations is the creating of a simplified system for a less cumbersome process for the employees, especially the combination and permutation of benefits may create a hurdle administratively particularly during the enrolment period. A solution would be to implement a more sophisticated system – a user-friendly interface with automated process that can integrate with organisations’ internal IT systems, which may contribute to the high initial cost investment.

Conclusion

The introduction of a flexible benefits scheme may be a game-changer and set one organisation apart from the rest. However, organisations should not be too concerned with surpassing their competitors in providing innovative benefits as long as they are aligned with their corporate philosophy. For example, organisations that emphasise employee wellness as part of its corporate DNA may consider incorporating health screening and physiotherapy reimbursement as part of the benefits list., whereas organisations that focus on financial wellness of their employees may offer covering personal financial advisory expenses.

Based on the employee engagement surveys we have conducted for our clients, it is evident that ‘flexibility’ and ‘freedom to choose’ are the magic ingredients to a positive correlation to productivity and engagement levels. When employees are given the freedom to choose their preferred benefits based on their needs, they become more engaged.

It is critical for business leaders to note that the return on investment of a flexible benefits scheme vary from organisation to organisation. The advantages of having flexible benefits have been proven as an effective prescription for employers to retain and attract dynamic talents as well as managing organisations’ cost and benefit. Our experience with clients shows that sufficient organisations’ participation, maturity of the platform vendors, and increasing appreciation from employees will pave the way for the flexible benefit scheme to become the ultimate valued enhancer for the overall organisation’s performance.

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About Contributor

Melisa Soentoro is a Principal at Korn Ferry Hay Group Indonesia. She has deep experience in people strategy formulation, organization structure design, performance management, remuneration design, and strategic workforce planning (SWP). Melisa has a good understanding of different human capital needs and the best practice talent management implementations in various industries including oil & gas, plantation, manufacturing, infrastructure, telecommunication, and banking.

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